The once-high-flying teen retailer Aeropostale (NYSE:ARO) has continued its recent descent back to Earth. Yesterday, the company reported yet another month of mediocre comps growth. However, the stock remains a Street favorite; it gained nearly 2% after the news was announced.
Aeropostale reported sales gains of 5.3% to $111.4 million for June. However, comps barely got off the ground, managing a gain of just 0.2%. This is the third consecutive month in which the company has posted lackluster same-store sales. Thus far this year, comps growth at Aeropostale has been a minuscule 1.9%.
As several other retailers struggle through a difficult environment, perhaps any increase in comps should be considered a success. However, with its steep price, I don't think that applies to Aeropostale. Most of the companies that compete directly with Aeropostale have yet to announce June sales, but American Eagle Outfitters (NYSE:AEO) did report yesterday, and it posted a much more impressive 8% comps increase. That shows there are still plenty of teens out there looking for threads, making Aeropostale's flat performance even more unimpressive.
Although Aeropostale's stock price has dropped a bit since its highs back in May, it's still too pricey for this Fool. The fact that the stock price continues to trend higher despite a lackluster performance reaffirms my belief that investors may not be acting rationally. I'm afraid that means when the Street finally does turn on Aeropostale, and I predict that it will, the company will fall that much farther. As an alternative, investors may want to get a closer look at American Eagle. The Street has been much less kind toward this teen retailer, so I think it has much more upside potential.
(Too late. American Eagle's stock price soared 6.5% after hours).
American Eagle Outfitters is a Motley Fool Stock Advisor recommendation. You can see how this and other great companies are helping the newsletter beat the market by signing up for a complimentary 30-day trial.
Fool contributor Mike Cianciolo welcomes feedback and doesn't own any of the companies in this article.
